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Boards are dangerous to founder/CEOs

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Re: Boards are dangerous to founder/CEOs

#261

Post by jacquesm »

rsweeney21 wrote: post #48

I always thought stuff like this happened to OTHER founders, but would never happen to me. But my board fired me six months after closing our series A. The advice in this article is 100% spot on. I didn't know any of this. I was totally focused on building my company. But if you raise money you can't do that anymore. 50% of your time will always be occupied with working on your next round of funding or managing your…

Unless you have reasons not to naming and shaming investors and boardmembers that did this would be A-ok with me.

Re: Boards are dangerous to founder/CEOs

#262

Post by jacquesm »

tdfx wrote: post #245
distribot wrote: post #207

Earlier quoted context omitted.

Anyone know how Zuckerberg avoided the same thing happening to him? Bezos was a 30 year old with a decade of experience in finance, I assume he was quite savvy. But Zuckerberg was a teen.

As far as I can tell, Zuckerberg's true talent is being thrown into situations he has no life experience to handle and appropriately picking the right people to surround himself with and listen to.

To steal their ideas and screw them over.

Re: Boards are dangerous to founder/CEOs

#263

Post by jacquesm »

ganeumann wrote: post #235
gnopgnip wrote: post #231

Earlier quoted context omitted.

The board and officers still have a fiduciary duty to minority share holders. Even if they can vote the company is worth zero and issue 100x as many shares, a court can say the company wasn't worth zero and they need to compensate the former owner.

While this is theoretically true, I think you would be hard-pressed to find an example of someone suing and winning.

I know of several such cases, but it's costly, and usually a good idea to decide whether or not you want to pursue something like this involves the cost (and stress) of a lawsuit over an extended period of time, and to ensure that that is outweighed by the upside of winning the case.

Re: Boards are dangerous to founder/CEOs

#264

Post by rokhayakebe »

Digory wrote: post #49

Never stand between people and a pile of money. Your Board doesn't fire you when you're the best guide to a pile of money. Your Board will fire you if they think you're slowing their progress toward a pile of money. If you think your skills as a guide to piles of money are imperfect, don't put your life in the hands of people who need you to rapidly increase their pile of money.

Never stand between people and a pile of money.

Re: Boards are dangerous to founder/CEOs

#265

Post by jacquesm »

mritchie712 wrote: post #53
rsweeney21 wrote: post #48

I always thought stuff like this happened to OTHER founders, but would never happen to me. But my board fired me six months after closing our series A. The advice in this article is 100% spot on. I didn't know any of this. I was totally focused on building my company. But if you raise money you can't do that anymore. 50% of your time will always be occupied with working on your next round of funding or managing your…

I’ve been doing a lot of research on debt as an alternative to VC. A ton of options out there. Keeping notes here for anyone interested https://www.trypaper.io/

Be sure to read the fine print with debt and to realize that even if the interest rates are good it's not necessarily going to stay that way unless you negotiate it to be.

No financing option is without risk.

Re: Boards are dangerous to founder/CEOs

#266

Post by jacquesm »

buryat wrote: post #73
drno123 wrote: post #67

Earlier quoted context omitted.

Who was your investor? So other startups know who to avoid.

2017-10-04 Series A - Numetric $13M Insight Partners — lead investor Hack VC EPIC Ventures Draper Associates Aaron Skonnard https://www.crunchbase.com/funding_round/numetric-series-a--...

There should be a reverse ledger where you can look up the misdeeds of VCs, their partners and various other people active in the investment scene so you as a founder have a way to evaluate who you are getting into bed with.

Re: Boards are dangerous to founder/CEOs

#267

Post by jacquesm »

freejazz wrote: post #230
ajkjk wrote: post #215

Earlier quoted context omitted.

You sell them.. returns on their money. That's the whole point, right?

Then don't sell voting stock?

Then you won't be raising any money. It isn't unusual to see VCs insist they get more rather than fewer rights and preferential treatment options because they are later to the party and get to dictate their terms or they walk. That's why you in theory should always negotiate from strength, the weaker your position the bigger the chance that you will have to accept unfavorable terms.

Re: Boards are dangerous to founder/CEOs

#268

Post by jacquesm »

javajosh wrote: post #146
breischl wrote: post #133

Earlier quoted context omitted.

Had this happen on a much smaller scale as an employee. I (foolishly) bought out some of my options when I left the company. Years later they sold it, but structured the deal such that the major investors got paid out all the proceeds, leaving zero for the common shares. Yes, I realize preferred shares and payout preferences and so forth. The really galling part is that the exec team (who had themselves acquired, not…

All the horror stories around VC money and shennanigans like this make bootstrapping look not just appealing, but required. It's an iterated game that they play a lot, and you play once, and they have no incentive to play fair. I'm glad some of them were named and shamed in this thread, though. Like, why would anyone take money from someone who has acted in bad faith many times in the past? It reeks of unaccountable…

It's all about who you do business with. Some VCs are ethical, some aren't. Some are horrible and turn around to become a pest the day after they invest, some go out of their way to help the companies they invest in succeed.

Re: Boards are dangerous to founder/CEOs

#269

Post by jacquesm »

splitstud wrote: post #259
javajosh wrote: post #146

Earlier quoted context omitted.

All the horror stories around VC money and shennanigans like this make bootstrapping look not just appealing, but required. It's an iterated game that they play a lot, and you play once, and they have no incentive to play fair. I'm glad some of them were named and shamed in this thread, though. Like, why would anyone take money from someone who has acted in bad faith many times in the past? It reeks of unaccountable…

Mostly I believe it happens because 95% of tech founders have no business being anywhere near the c Suite. So they fall prey to venture bandits who will let them call themselves ceo or entrepreneur. If you're actually ceo material, use debt, private or commercial. Figure out the Toronto stock exchange.

I like 'venture bandits' as a term. Another I've seen is Vulture Capital.

Re: Boards are dangerous to founder/CEOs

#270

Post by LudwigNagasena »

distribot wrote: post #207
jasode wrote: post #147

Earlier quoted context omitted.

>They don't have to value the company at $0 to fuck you over once you're gone. The current board can depreciate all of the shares by 50% and then issue themselves twice their original shares so they break even. Mark Zuckerberg tried a variation of that game to cut out Eduardo Saverin's shares when they changed the company from a Florida LLC to a Delaware Inc. Well, Saverin sued and Facebook lost that lawsuit; they se…

Anyone know how Zuckerberg avoided the same thing happening to him? Bezos was a 30 year old with a decade of experience in finance, I assume he was quite savvy. But Zuckerberg was a teen.

He has the controlling stake in the company.
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